Tencent’s 52% Stock Run-Up Gets New Life From ‘Brawl Stars’ Game

(Bloomberg) -- Tencent Holdings Ltd. is one of a few companies coming out of the Covid-19 pandemic in a better position than it started, having seen a surge in gaming activity as people stay home worldwide. And now the mobile video-game giant could see an extension of its rally after the release of its latest title, Brawl Stars.

The multi-player shooter game made by Supercell, a Tencent-backed game producer also behind the popular Clash of Clans title, debuted in early June as China’s most downloaded game. According to Bloomberg Intelligence, Brawl Stars’ release in China led to a nearly 2.5x sequential jump in downloads for Tencent.

The game’s traction helped support Tencent’s “otherwise lackluster sales,” Vey-Sern Ling, a senior Bloomberg Intelligence analyst covering the Internet sector, wrote in a note to clients.

The company’s ADRs rose for a second consecutive session on Tuesday to extend an all-time high, bringing its rally since a bottom in March to 52%, before retreating on Wednesday. Few on Wall Street are tracking the company’s ADRs. It has two buys, one hold and no sells.

Barclays Capital Inc. analyst Greg Zhao sees recent catalysts in Tencent’s gaming services and other major business segments as “solid and encouraging.” Gaming traffic in overseas territories like the U.S. is much stronger in the second quarter than the prior period, he said, citing both seasonality and a pandemic-induced lockdown. As for China, gaming momentum is gradually normalizing now, Zhao highlighted in a note dated June 23.

With fears from a second coronavirus wave appearing imminent, Tencent and other stocks correlated to in-home entertainment could see further upside as people decide to quarantine again.

©2020 Bloomberg L.P.